The reason comes before the formula
Separation pay computation begins with why employment ends. Retirement pay begins with the applicable retirement arrangement and eligibility. They are not interchangeable labels for a goodbye payment.
Review the employment history, contract, collective agreement and company policy. A more favorable entitlement can change the result.
Separation pay depends on the ground
Under the Labor Code, redundancy or installation of labor-saving devices generally carries at least one month’s pay or one month per year of service, whichever is higher. Qualifying retrenchment or closure not due to serious business losses generally uses at least one month’s pay or half a month per year, whichever is higher. A fraction of at least six months counts as a year.
The ground and its requirements need legal review. Ordinary voluntary resignation does not automatically trigger these statutory formulas.
Retirement follows a different test
Absent an applicable plan or agreement, covered employees generally qualify at age 60 or more, up to compulsory retirement at 65, with at least five years’ service. The statutory half-month benefit commonly comprises 22.5 days per credited year. Coverage exclusions and special occupations need separate checks.
At an illustrative ₱800 daily rate and ten credited years, the basic 22.5-day calculation is ₱180,000. This assumes eligibility and no superior plan. It is not a universal retirement quote.
Do not force every exit into one template
Create distinct worksheet sections for the reason, eligibility, salary basis, service period and formula. Keep separation, retirement, unpaid salary and leave conversion clearly labelled. Have the conclusion reviewed before communicating it.
OLi HR can keep supporting records connected. A payroll field cannot decide entitlement. Use the final-pay checklist to bring the approved components together.
Sources and scope
Checked. 5 October 2026. Labor Code post-employment provisions · DOLE retirement guidance. Examples are illustrative. Coverage, exceptions and more favorable terms matter. For a specific legal or tax issue, obtain advice based on the facts.
Quick answers
Does resignation always earn separation pay?+
No. Check the law and any favorable policy or agreement.
Is retirement pay just 15 days per year?+
The statutory half-month definition includes additional components and commonly totals 22.5 days for covered employees.
Original practical guidance prepared for OLi with AI assistance. It focuses on workflow and product evaluation. It does not replace your organization’s policies or professional advice.
